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How is the tax accounted for?

I have a UK resident individual invoicing through an SA agency to an SA company for his services.

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The client came to the UK in December 2020 but formerly lived in SA. He "works" for an SA based company providing his services from the UK, but he provides his services through an SA based agency (Limited company equivalent). He is not a director or shareholder of the agency and has no financial interest in it or control over it so does not fall under IR35 as far as I can see. He raises monthly invoices to the agency who then pass the invoice on to the end user. Should the SA agency be setting up a UK PAYE scheme and deducting PAYE before paying to my client or does he just treat it as self-employment and pay tax and NI as a self-employed individual? Does this fall under an Umbrella company where he would be paying both employees and employers NI? I can't seem to find the answer and am just going round in circles. Any help would be appreciated and any suggestions as well.

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By lesley.barnes
01st Jul 2021 16:56

Where is the end user based?

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By DTB27
02nd Jul 2021 09:08

The end user is based in SA. The client provides his services through an SA based agency to an SA based company. In SA, for tax purposes, my client is deemed to be self-employed they do not have an IR35 type system over there apparently.

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By DTB27
02nd Jul 2021 09:11

Just to clarify, I am only trying to clarify the UK position, I have already told the client he would need specific advice in SA to deal with any issues there as I am not versed in the SA tax system.

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By lesley.barnes
02nd Jul 2021 09:42

www.gov.uk/guidance/april-2020-changes-to-off-payroll-working-for-clients

The section "When a client is overseas" outlines that IR35 doesn't apply if the client is wholly overseas and outlines what this means. If everything handled is in SA and only your client is in the UK if he works through his/her limited company the old rules for IR35 apply for determining whether they are caught or not.

If he/she is working as sole trader then IR35 doesn't apply.

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By DTB27
02nd Jul 2021 09:55

Thanks for the reply Lesley.

I was fairly certain IR35 did not apply anyway as it is not his company he provides his services through but an SA based agency (possible equivalent of an Umbrella company in the UK). My concern is if the (for want of a better description) SA Umbrella company should be setting up a UK payroll and deducting PAYE and NIC before paying my client.

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By lesley.barnes
02nd Jul 2021 11:05

No the SA company doesn't need a payroll IR35 doesn't apply if they are wholly outside the UK. The SA company isn't your concern. I presume your client invoices them and they pay his invoices. Is he registered for self assessment in the UK or is he using a UK limited company.

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Replying to lesley.barnes:
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By DTB27
02nd Jul 2021 11:16

Yes, my client invoices the SA agency and they pay his invoices. He is not yet registered for self-assessment (only just taken him on) but is not using a UK company.

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By lesley.barnes
02nd Jul 2021 13:24

IR35 doesn't apply to a sole trader

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By Hugo Fair
02nd Jul 2021 14:15

True, but OP originally said:
'He "works" for an SA based company providing his services from the UK'
... so needs to be a lot more careful when describing the nature of the relationship between client and SA agency (and indeed the end user), especially if talking to HMRC in the future.

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